Forex Daily Wrap: EUR/USD And GBP/USD See Weakness

Today’s European session kicked off with the USD index breaking out from its tight overnight range early on and moving through 95.5 to the upside to print fresh 11 year highs. This consequently led to weakness in both EUR/USD and GBP/USD, which was compounded by lower than expected Services PMIs from across Europe and the UK, which saw EUR/USD printing 11 year lows. A resistance level could come in the form of the 50% retracement from the 2001 high to the 2008 low at 95.859. The European afternoon session saw tier 1 data coming out of the US, kicking off with ADP, which failed to move the USD as the lower than expected headline was countered by an upward revision (212k vs. Exp. 219k, Prev. 213k, Rev. 250k). After this ISM Non-Manuf. Composite printed better than expected (56.9 vs. Exp. 56.5, Prev. 56.7), seeing sentiment further bolstered and the USD continue to strengthen. Elsewhere, Switzerland's Finance Minister said this afternoon that she would like the reintroduction of a minimum exchange rate, which saw a sharp move higher in EUR/CHF, before the Swiss government issued a denial which saw the cross pare the earlier move.

Today also saw the BoC rate decision, with the majority of analysts surveyed forecasting that rates would remain the same, however with some analysts suggesting a cut, the announcement of rates remaining the same did lead to a move lower in USD/CAD, with the pair earlier drifting upwards as a consequence of the aforementioned USD strength. Elsewhere, two more central banks joined the rate-cutting bandwagon today; during Asia hours the RBI unexpectedly cut its Repo and Reverse Repo rates by 25bps to 7.5% and 6.5% respectively, before the Polish Central Bank cut their base rate by 50bps to 1.50%, with the majority of analysts expecting a 25bps cut, seeing an immediate weakening against the EUR as EUR/PLN rose by over 100 pips, before paring the move when the central bank then stating that their period of loose monetary policy has ended, later seeing session lows as a consequence of the comments. Future cuts also look likely, with Turkish Economy Minister continuing his vocal criticism of the Turkish bank this afternoon stating the national central bank should have lowered their benchmark rates more quickly, with the central bank scheduled to meet on March 17th.

Looking ahead, tomorrow looks to be an eventful day with the ECB rate decision and press conference, the BoE rate decision and US & German Factory Orders.